Study On Executives’ Excess Remuneration And Emolument Manipulation Of State-owned Enterprise

As the backbone of Chinese economy development, the management level ofstate-owned enterprises determines its effective operation to a large extent. Top executivesmay manipulate the performance of the enterprise by conducting earnings to obtain highersalary, which would damage the stockholders’ equity seriously and has been focused byresearchers widely. Top executive compensation of monopoly industries and non-monopolyindustries has been a big topic in recent years. Principal-agent theory believes that by makingthe most optimal compensation contracts can effectively motivate executives to wore for thegoal of maximizing the shareholders’ wealth. However, the phenomenon of executivecompensation anomalies has questioned the optimal contract theory in recent years. Thetheory of management power partly explains why the optimal contract between enterprisesand executive is not optimal. How dose the management power theory explain the executivecompensation of China’s state-owned enterprises? how dose an executive use their power toinfluence their own pay of China’s state-owned enterprises? Through what way can reduce theirrationality of executive pay? The study of the above questions has important significance forthe consummating of our country state-owned enterprise’s executive compensation andprotecting investor rights.This paper collected the data of listed state-owned enterprises from2006to2012, tookthe listed state-owned companies in our country as the original sample and compared thewhole sample, monopoly industry and perfect competition industry. By studying wether theexecutives’ power could manipulate his pay and what their preferences and method are, thispaper draw the following conclusions: the top executives of state-owned enterprises in ourcountry can get extra pay by power on the whole, and the bigger their power is, the greaterthey can gain. Different types of state-owned enterprises have different preferences forexcess returns. Monopoly industry executives prefer to get excess Concealed on-jobconsumption as alternative choice of monetary compensation. Executives of other industryprefer to get monetary compensation. Completely competitive enterprise did not use theirpower to manipulate compensation, but the sensitivity between pay and performance in fully competitive enterprise is greater than the monopoly industries, which indicate that theincrease of marketization degree can inhibit executives to use power to influence their pay. In the state-owned enterprise especially the monopoly industry，executives can use hispower to affect their compensation by influencing the performance indicators and managingearnings. Compared with monopoly industry and state-owned enterprise, executives incompletely competitive industry don’t use their power to manipulation their compensation.Combining with the research results above, this paper proposed opinions and countermeasuresto consummate the incentive mechanism in listed state-owned companies of our country fromthe following aspects:importing competition mechanism, broadening the performanceevaluation standard, strengthening the information disclosure system and supervision,perfecting manager market, perfecting the relevant law of executive’s compensation incentivein state-owned enterprises, restraining executive power and improving the structure ofexecutive compensation. Taking these measures can reduce the impact caused by executive toprofits and prevent the shareholders’ equity from being damaged.